Two arrested in connection with Rolls-Royce probe as engineering giant reports results

Technicians carry a Trent XWB blisk engine component, the Rolls-Royce engine used to power the Airbus A350, during manufacture at the Rolls-Royce Deutschland Ltd. & Company KG factory in Oberursel, Germany, on Friday, Aug. 30, 2013. Rolls-Royce has made boosting profitability one of its focus areas as it tries to translate growth, particularly in commercial aerospace, into earnings that match the performance of companies such as General Electric Co., the airliner-engine industry leader. Photographer: Ralph Orlowski/Bloomberg

Two men have been arrested in connection with an investigation understood to be related to Rolls-Royce’s dealings in Asia.

The Serious Fraud Office, assisted by officers from both the National Crime Agency and the City of London Police, said it had executed search warrants at “various properties in London” which had led to the arrests.

However, it declined to comment further and Rolls-Royce also offered no comment.

Two days before Christmas Rolls-Royce said the SFO had launched a full-scale investigation into possible bribery and corruption in Indonesia and China.

A year earlier it said internal investigations had “identified matters of concern” in the two countries “and in other overseas markets” and said it would co-operate fully with the SFO.

News of the arrests comes as an the engineering firm announced its full-year results. The firm reported underlying profit of £1.83 billion for 2013, up from almost £1.5 billion a year earlier. Revenue also rose 27% to reach £15.5 billion in the year.

He added that the business expected a slowdown in revenue and profit growth, "reflecting offsetting trends across the business".

Allegations of corruption have plagued the defence industry, notably BAE Systems, whose dealings in various countries led to a £286m fine in 2010. But Rolls-Royce’s record had been largely unscathed until Dick Taylor, a retired former engineer for the company, started to raise issues about its operations in Indonesia, regularly posting his concerns on websites.

The US Department of Justice was also informed and its involvement in any probe could cause a major headache for Rolls. The DoJ has a reputation of putting companies through the wringer.

However, experts cautioned that the SFO still faced challenges if the allegations eventually led to a prosecution.

“Unless relevant activities took place after June 2011 they won’t be covered by the Bribery Act but by the old bribery offences,” said Omar Qureshi at the law firm CMS Cameron McKenna. “These are more complex and difficult for prosecutors to prove, particularly in respect of corporates. If Rolls-Royce itself is to be prosecuted that would require evidence of senior management involvement.”